SCF $25m loan recorded as $25,000

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A $25 million loan was mistakenly recorded as one for just $25,000, the South Canterbury Finance (SCF) trial has heard.

The country's biggest fraud trial resumed yesterday before Justice Paul Heath in the High Court at Timaru after a three-week adjournment.

Former SCF directors Ed Sullivan and Robert White, and former chief executive Lachie McLeod, face a total of 18 charges brought by the Serious Fraud Office (SFO).

The final portion of the trial is expected to take up to three weeks, including closings, with the verdicts to be delivered in October.

Former SCF group accountant Terrance Hutton is the final witness. He was on the stand giving evidence for the defence yesterday.

Some of his evidence centred around a $25m loan for the purchase of the Hyatt Hotel in Auckland. Hutton originally faced a charge of false accounting in relation to the loan. He had two charges brought by the SFO, which were dropped in October last year.

Hutton said he queried White over a loan for $25m when he found a cheque butt recording it.

"It was a $25,000 cheque butt for a $25m loan. The discrepancy made it stick out.

"I suggested that a hotel becoming a subsidiary of a finance company would not go down well with investors. It was not our core business. I would not expect the company to be involved with lending to get into the hotel business."

SCF had been a mezzanine finance company providing lending behind two other banks for the Hyatt. "One of them [the banks] wanted out, our exposure was at risk so we took out the second security."

Late SCF chairman Allan Hubbard then put the hotel into his company Hornchurch, which was later unwound as it was a related party. Hutton sent emails to McLeod suggesting how the loan could be dealt with.

"In hindsight the words [of the email] were badly chosen. I never expected to be under scrutiny at any stage," he told the court.

The Crown alleges the Hyatt transaction was structured to hide a related party transaction, breaching the deed of the Crown deposit guarantee scheme.

Hutton described White as his mentor, whom he could always approach to discuss issues. McLeod, he said, had a limited financial background.

Canadian-raised Hutton has been in New Zealand since 1976. He earlier worked for Hubbard and Churcher but has since retired. He, along with McLeod, faced a second charge of false accounting for a $10m loan to Kelt Finance, which the Crown alleges was simply cheque-swapping.